Amazon.com, Inc. (NASDAQ:AMZN), will provide business loans to its sellers in France, India, China, Canada, Italy, Germany, the U.K. and Spain. Its main is to increase market share through offering cheaper business loans to select sellers on its online store.
The company has tested the loan offering in the U.S. and Japan for a number of years before deciding to roll out the plan in seven nations. The new sellers can obtain funding between $1000 and $600,000 to buy inventory.
Amazon will credit the loan amount into the credit account of the sellers. It will be transferred to the bank account of the sellers later. The loan tenure varies from 3 to 6 months.
How the Sellers Repay the Loan?
Amazon will collect the monthly payments directly from the sale proceeds on its online store. It will not charge any penalty for loans repaid before the loan tenure. It will not report to the credit bureau if you fail to make the payment on time usually on 27th of every month. However, Amazon will deduct the amount due directly from the sale proceeds before crediting into the sellers account.
Loans from Amazon are highly beneficial for the small sellers because traditional banks do not offer loans at cheap rates. Even if they obtain funding from credit cards or other means, interest rates are very high. The banks are interested in offering larger loans to the businesses. Therefore, Amazon offers a helping hand to the sellers on its store to grow their businesses.
Contrast between Amazon Loans and other loans
Amazon.Com, Inc. (NASDAQ:AMZN) charges an interest of 12.99% for a loan amount of $10,000 for six months tenure whereas the interest rates of Square Capital, OnDeck, Credit Card Advance, and MCA are 23.49%, 88.69%, 32.11%, and 115.84%.
Therefore, the interest charged by Amazon is very less when compared to other lenders from the above findings. The company offers cheaper loans taking your inventory as collateral. If you do not pay in time, Amazon recoups the losses through selling your inventory.